- 02 Oct 2017
- What Do You Think?
Do Bitcoin and Digital Currency Have a Future?
SUMMING UP Bitcoin has shown to be a powerful digital currency, but the real story of the future is Blockchain, say James Heskett's readers. Open for comment; Comment(s) posted.
- 20 Mar 2017
- Working Paper Summaries
Bubbles for Fama
Nobel laureate Eugene F. Fama has famously claimed that there is no such thing as a bubble, which he defines as a large price run-up that predictably crashes. Analyzing industry data for the US and internationally, the authors find that Fama is mostly right that a sharp price increase of an industry portfolio does not, on average, predict unusually low returns going forward. Yet the authors show that there is much more to a bubble than merely increases in prices; they show a number of characteristics that predict an end to the bubble.
- 02 Mar 2016
- Working Paper Summaries
Extrapolation and Bubbles
Bubble episodes have fascinated economists and historians for centuries, in part because human behavior in bubbles is so hard to explain, and in part because of the devastating side effects of the crash. At the heart of the standard historical narratives of bubbles is the concept of extrapolation—the formation of expected returns by investors based on past returns. This paper presents a simple model of extrapolative bubbles that explains a lot of evidence and makes new predictions.
Diagnostic Bubbles
The financial crisis of 2007-2008 revived academic interest in price bubbles but many conceptual questions remain open. This paper generates insights into the structure of asset price bubbles by modeling beliefs from fundamental psychological assumptions, and combining this with standard neoclassical mechanisms, such as learning from prices and speculation.